Practice Problem Set 8 – Expected Insurance Payment – Additional Problems
This practice problem set is to reinforce the 3part discussion on insurance payment models (Part 1, Part 2 and Part 3). The practice problems in this post are additional practice problems in addition to Practice Problem Set 7. Another problem set on expected insurance payment: Practice Problem Set 9.
Practice Problem 8A 
Losses follow a uniform distribution on the interval .
Determine the expected payment per loss. 
Practice Problem 8B 
Losses follow a uniform distribution on the interval .
Determine the expected payment per loss. 
Practice Problem 8C 
Losses in the current year follow a uniform distribution on the interval . Further suppose that inflation of 25% impacts all losses uniformly from the current year to the next year. Losses in the next year are paid according to the following provisions:
Determine the expected payment per loss. 
Practice Problem 8D 
Liability claim sizes follow a Pareto distribution with shape parameter and scale parameter . Suppose that the insurance coverage has a franchise deductible of 20,000 per loss. Given that a loss exceeds the deductible, determine the expected insurance payment. 
Practice Problem 8E 
Losses in the current year follow a Pareto distribution with parameters and . Inflation of 10% is expected to impact these losses in the next year. The coverage for next year’s losses has an ordinary deductible of 1,000.
Determine the expected amount per loss in the next year that will be paid by the insurance coverage. 
Practice Problem 8F 
Losses in the current year follow a Pareto distribution with parameters and . Inflation of 10% is expected to impact these losses in the next year. The coverage for next year’s losses has a franchise deductible of 1,000. Determine the expected amount per loss in the next year that will be paid by the insurance coverage. 
Practice Problem 8G 
Losses follow a distribution that is a mixture of two equally weighted exponential distributions, one with mean 6 and the other with mean 12. An insurance coverage for these losses has an ordinary deductible of 2. Calculate the expected payment per loss. 
Practice Problem 8H 
Losses follow a distribution that is a mixture of two equally weighted exponential distributions, one with mean 6 and the other with mean 12. An insurance coverage for these losses has a franchise deductible of 2. Calculate the expected payment per loss. 
Practice Problem 8I 
You are given the following information.
Determine the average payment per loss. 
Practice Problem 8J 
You are given the following information.
Determine the percentage change in the expected claim cost per loss when losses are uniformly impacted by a 20% inflation. 
All normal probabilities are obtained by using the normal distribution table found here.
Problem  Answer 

8A 

8B 

8C 

8D 

8E 

8F 

8G 

8H 

8I 

8J 

Daniel Ma actuarial
Dan Ma actuarial
2017 – Dan Ma
November 26, 2017 at 10:42 pm
[…] Practice Problem Set 8 […]
November 26, 2017 at 10:43 pm
[…] Additional problem set: Practice Problem Set 8. […]
December 3, 2017 at 10:36 pm
[…] This practice problem set is to reinforce the 3part discussion on insurance payment models (Part 1, Part 2 and Part 3). The practice problems in this post are additional practice problems in addition to Practice Problem Set 7 and Practice Problem Set 8. […]
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